Now that businesses are starting to receive and utilise the stimulus measures announced by the government and the Australian Taxation Office (ATO), the question many clients are asking us is “how do I account for these transactions?”
The below table shows a summary of how to enter COVID-19 concessions into your accounts system, often done via accounting software. The Goods and Service Tax (GST) reporting column shows how the GST or tax code should be entered for reporting the transaction in a Business Activity Statement (BAS).
Account to use
|JobKeeper payment received from ATO||New “Other income” account||BAS excluded|
|JobKeeper payments to employees||Part of “Salary & wages” account||BAS excluded||Remember to top up employees to $1,500 per fortnight (or equivalent for weekly/monthly pay cycles).
Both MYOB & Xero have a process to enrol employees for JobKeeper.
|Small Business Cash Flow Boost||New “Other income” account||BAS excluded||Record as part of BAS payment/refund.|
|Instant asset write-off||Fixed asset account eg “Motor Vehicles”, “Plant & Equipment”||GST on capital expenses||Pilot will calculate your total tax depreciation claim when we prepare your 2020 financial year income tax return.|
|ATO payment deferrals||“Trade creditor”||BAS excluded||We encourage clients to set up a creditor to allow tracking of the payment date.|
|PAYG instalment refunds||“Provision for tax account”||BAS excluded||Code refunds received to the provision for tax account to cancel out the instalments paid on September & December 2019 BASs.|
|Remission of GIC||“Interest expense”||GST free||This will cancel out the earlier expense.|
|Payment arrangements||“Trade creditor”||BAS excluded||We encourage clients to set up a creditor to allow tracking of the payment date which can assist with cash flow planning.|
|Federal or Qld Government loans – drawdown||New “Non-current liability”||BAS excluded|
|Federal or Qld Government loans – interest payments||“Interest expense”||GST free|
|Payroll tax refunds||“Payroll tax expense”||GST free||This will reduce the original payment.|
|Payroll tax deferral||“Payroll tax expense”/”creditor”||GST free||Create a creditor so you can track the future payment required which can assist with cash flow planning.|
|Land tax rebate||“Land tax expense”||GST free||This will reduce the original payment.|
|Land tax waiver||“Land tax expense”||GST free||This will reduce the original payment.|
|Land tax deferral||“Land tax expense”/”creditor”||GST free||Create a creditor so you can track the future payment required.|
* View our comprehensive Xero guide covering these concessions.
Here are some examples:
- Small business Cash Flow Boost needs to be set up as a new account in the ‘Other income’ section of the chart of accounts. The payments received by the ATO do not need to be reported in the BAS. The BAS excluded GST code should be selected as the default GST code when you set up the new account in your accounting software. You can continue to record BAS payments/refunds the same as usual. However, you will need to include an extra line in the transaction to show the cash boost received from the ATO.
- A purchase of office furniture totalling $30,000 GST inclusive would be coded to an asset account called ‘Furniture or fittings’ or ‘Office Furniture’. The transaction should use the GST on capital expenses tax code in order to claim the GST on the purchase in the next BAS. No other action is required as the deduction for tax depreciation will be calculated by your Pilot Advisor when we complete the 2020 income tax return.
Note, if you are required to report under Australian Accounting Standards, you may need to consider other factors and treatments additional to those outlined above, and you should discuss this with your advisor.
Please contact Kylee Smith or your Pilot Advisor on 07 3023 1300 for further assistance with regards to managing your COVID-19 concessions.